The spectre of dollar doomsday still looms

 


With all due humility, I believe that the recent dollar 
depreciation of 5 per cent has considerably further to go.
Jan Hatzius, chief economist at Goldman Sachs
https://englundmacro.blogspot.com/2025/04/the-dollar-has-further-to-fall-chief.html


Whatever happens with Trump’s tariffs, investors need to prepare for a new market paradigm

I’d point to three fundamental issues, starting with an over-reliance on asset price-driven economic growth.

The exposure of US households to stocks is near an all-time high 

(equities and mutual funds represent 26 per cent of total household assets), 

which implies much more vulnerability to any market downturn, for both individuals and the overall economy.

Another significant concern I have about US markets is the sharp increase in private sector debt and leverage over the past few years. 

Corporate borrowing from private credit markets has been booming, particularly from companies that would have been considered too risky for bank loans.

This could eventually result not only in shadow banking failures but problems in the formal banking sector, 

which is far more exposed to non-bank entities than it was in 2008, when the global financial crisis erupted.

Rana Foroohar Financial Times 28 April 2025

https://www.ft.com/content/4dfdcac7-2a7d-459f-bfe7-90df82e3dda5


Everything from an increasingly volatile T-bill market to a home lending market now dominated by shadow banks

Rana Foroohar FT 25 September 2022

https://englundmacro.blogspot.com/2023/08/fed-drawn-into-shadows.html


Private Credit’s Cracks

The companies that get private credit loans are looking increasingly wobbly and banks are among those that could eventually be on the hook for losses.

Many companies getting direct loans from private lenders are struggling to produce cash, by at least one key measure: At the end of 2024, more than 40% of borrowers had negative free cash flow from their businesses,

the International Monetary Fund warned in a report this past week

https://www.imf.org/-/media/Files/Publications/GFSR/2025/April/English/ch1.ashx

Any increase in defaults among direct lenders’ customer base could have a knock on impact for banks because they now have more than $500 billion of exposure to private credit, which the money managers use to lend more to customers.

Bloomberg 26 April 2025

https://www.bloomberg.com/news/articles/2025-04-26/private-credit-s-cracks-widened-before-turmoil-credit-weekly


Tillbaka till Rolfs länktips 28 april 2025

https://englundmacro.blogspot.com/2025/04/rolfs-lanktips-28-april-2025.html

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